Why and how should I draw up a business plan?

If you’re starting a new venture, a business plan is a highly effective way to refine your thoughts.

A business plan is a document outlining the goals of a business and how it plans to achieve them. Writing everything down will prompt you to consider these goals and how to turn them into reality.

You will have to consider all aspects of the business including finance, marketing, operations and sales, and how these will work together to achieve your goals.

You will also need to set milestones to track your progress, and by identifying possible obstacles, you will be able to pro-actively address them. 

Your business plan can be one page or longer, depending on your needs. You can also prepare it as a presentation combined with a document providing more detail.

Benefits all round

Your business plan serves many purposes:

• If you need funding, a business plan can explain your business to investors and show how it will become profitable.

• A business plan will ensure that everyone working in your business is on the same page, working towards the same goals.

• In future, when you recruit key people, it will help determine whether they’re a good fit for the business.

What to include

No two business plans are alike, but all business plans should include:

• An executive summary with the key points in your business plan, including your mission. It may help to write this section last.
  
  
• Company description / overview – a broad outline of your business, the market and industry in which it operates and any significant trends.
  
  
• Problem and solution – why there is a need for your product or service and what solution you will provide.
  
  
• Market analysis – your target market and how it is segmented.
  
  
• Competition – an analysis of your competitors and what competitive advantage you have.
  
  
• Marketing strategy – how you plan to promote the business and generate sales.
  
  
• Goals, milestones and key performance metrics – how you will monitor and track progress.
  
  
• Financial projections – how the business will be funded together with projections including sales, cash flow and profits.

Mistakes to avoid

Be careful of becoming a slave to the business plan – it’s a tool and shouldn’t have a life of its own.

Although you do need to do proper research, don’t spend so much time on the plan (getting caught up in “analysis-paralysis”) that you lose out on valuable business opportunities. 

Also, putting in a huge amount of effort only to find that your business plan isn’t being taken seriously can be demoralising.

Some common mistakes to avoid:

• An incomplete plan. If you leave out important aspects, anyone who reads your plan will be left with questions.
  
  
• Sloppy presentation. Make sure the contents page is perfect, the charts and tables have headings and are consistent. Proofread the documents or have it proofread to ensure there are no spelling mistakes or grammatical errors. A sloppy document will not be taken seriously.
  
  
• Including too much detail, particularly if it’s technical. Keep your plan concise and rather append technical information that you refer to in the main body of the document.
  
  
• Making unrealistic assumptions. Check your assumptions and provide sources as far as possible. Fact check all your information, as this can impact on your credibility.
  
  
• There’s actually no plan. Presenting the market, opportunity and goals is wonderful but without listing the actions you will take and milestones you plan to achieve, you have no plan.
  
  
• Stating there’s zero risk. No venture is risk free, so don’t make false statements about this. Rather mention the risks and discuss how you’ll minimise them.

Lean business plan

If you don’t need funding or you want to get a better understanding of your business before you apply for funding, draw up a shorter and simpler version.

A lean business plan allows you to capture your ideas and should include:

• A business overview including a mission statement and description of the product or service provided;
  
  
• Team members’ details, experience and intellectual property;
  
  
• The target market and marketing plan;
  
  
• Your business goals and success metrics; and
  
  
• Finances – the sources of revenue and how profits will be generated.

This can be a good first step in defining the business. If you need funding though, you’ll need a more comprehensive business plan.

What could go wrong?

Writing a successful business plan isn’t always easy.  While you may be the driver of the business and know a lot about your product or service or an aspect of it, you may find yourself stuck when trying to document it all. Some challenges may include:

• Just getting started;
  
  
• Working out the financials;
  
  
• Identifying and understanding your target market;
  
  
• Being realistic about business growth;
  
  
• Making it interesting to read;
  
  
• Creating a practical strategy; and
  
  
• Proving that the idea is worthwhile.

As so much hinges on your business plan, it may be worth engaging a business consultant who can draft a professional document for you. It really is in your best interest to get it right from the beginning.  

A living document

Your business plan will be a constant reminder of your goals and will keep you focussed. But even the most beautifully written business plan cannot ensure business success.

As a start, you’ll need to stick to the plan and have good leadership. If any realities are different from the assumptions which you made, you’ll need to amend the plan.

If market conditions change, or there are other circumstances which you never anticipated, ring in the changes.

The ability to be flexible and adapt your plan is crucial in ensuring success. Revise and amend it at least annually.

Download a template for a one page business plan here (provided by SME advisers and developers Edge Growth).

Download a template for a business plan here (provided by SME advisers and developers Edge Growth).